PR Newswire | Oct 30, 2020 05:00PM EDT

10/30 16:00 CDT

American Savings Bank Reports Third Quarter 2020 Financial Results3Q 2020 Net Income of $12.2 MillionResults Reflect Economic Dynamics and Improved Noninterest Income from Core Activities HONOLULU, Oct. 30, 2020

HONOLULU, Oct. 30, 2020 /PRNewswire/ -- American Savings Bank, F.S.B. (American), a wholly-owned subsidiary of Hawaiian Electric Industries, Inc. (NYSE - HE), today reported net income for the third quarter of 2020 of $12.2 million. This compares to $14.0 million in the second, or linked, quarter of 2020, and $22.9 million in the third quarter of 2019.

"I continue to be impressed by the resilience of our customers as they adapt to the ongoing challenges of Hawaii's still-suppressed economy. Even so, because the timing of a sustained reopening of our tourism sector remains uncertain, our results again reflect elevated provision for potential credit losses," said Rich Wacker, president and chief executive officer of American. "While low interest rates continue to compress lending margins, in the third quarter we were able to reduce expenses and improve noninterest income from core activities, including strong mortgage banking income from our residential lending activity, replacing most of the prior quarter's gains on sales of securities."

Financial Highlights

Net interest income was $57.3 million in the third quarter of 2020 compared to $56.7 million in the linked quarter, and $62.1 million in the third quarter of 2019. Net interest income increased over the linked quarter as the bank deployed excess liquidity into the investment portfolio and lowered its funding costs during the quarter by increasing its low cost core deposit funding. Yield on earning assets continued to be impacted by the lower interest rate environment. Net interest margin for the third quarter of 2020 was 3.12%, compared to 3.21% in the linked quarter and 3.82% in the third quarter of 2019. Year to date net interest margin was 3.34%.

The provision for credit losses was $14.0 million in the third quarter of 2020 compared to $15.1 million in the linked quarter and $3.3 million in the third quarter of 2019. The provision for the third quarter of 2020 included approximately $12.3 million in additional reserves related to economic impacts from the pandemic. Total COVID-19 related reserves added year to date totaled $23.4 million.

The net charge-off ratio for the third quarter of 2020 was 0.32%, compared to 0.49% in the linked quarter and 0.69% in the third quarter of 2019. The lower net charge-off ratio in the third quarter of 2020 reflected improvement in credit quality of the personal unsecured loan portfolio. Nonaccrual loans as a percent of total loans receivable held for investment was 0.77% in the third quarter of 2020, compared to 0.86% in the linked quarter and 0.63% in the prior year quarter.

Noninterest income was $19.0 million in the third quarter of 2020, compared to $24.2 million in the linked quarter and $16.3 million in the third quarter of 2019. The decrease in noninterest income from the linked quarter was primarily due to higher second quarter gains on sales of securities of $9.3 million. Noninterest income in the third quarter of 2020 included the reinstatement of certain fees that had been temporarily suspended to support customers during the initial impact of COVID-19. Noninterest income was positively impacted in the third quarter by higher loan sales from increased mortgage banking originations due to the lower interest rate environment.

Noninterest expense was $47.3 million in the third quarter of 2020, compared to $48.4 million in the linked quarter and $45.9 million in the third quarter of 2019. Compared to the linked quarter, compensation and employee benefit expense was $1.4 million higher, reflecting increased mortgage banking activity, and was more than offset by $3.1 million lower COVID-19 related expenses.

Total loans were $5.5 billion as of September 30, 2020, up 7.3%1 from December 31, 2019, driven mainly by the addition of $370 million in Paycheck Protection Program loans, as well as increases in the commercial real estate and residential loan portfolios, offset by reductions in the home equity line of credit and consumer loan portfolios.

Total deposits were $7.0 billion as of September 30, 2020, an increase of 12.2%2 from December 31, 2019. The average cost of funds was 0.13% for the quarter, down five basis points versus the linked quarter and down seventeen basis points versus the prior year quarter.

Overall, American's return on average equity for the third quarter of 2020 was 6.75%, compared to 8.00% in the linked quarter and 13.75% in the third quarter of 2019. Return on average assets was 0.61% for the third quarter of 2020, compared to 0.72% in the linked quarter and 1.29% in the same quarter last year.

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1 Annualized from December 31, 2019, total loans as of September 30, 2020 increased 9.7%.

2 Annualized from December 31, 2019, total deposits as of September 30, 2020 increased 16.3%.

In the third quarter of 2020, American retained capital and did not pay a dividend to HEI. American had a leverage ratio of 8.3% at September 30, 2020.

HEI EARNINGS RELEASE, HEI WEBCAST AND CONFERENCE CALL TO DISCUSS EARNINGS AND 2020 GUIDANCE

Concurrent with American's regulatory filing 30 days after the end of the quarter, American announced its third quarter 2020 financial results today. Please note that these reported results relate only to American and are not necessarily indicative of HEI's consolidated financial results for third quarter 2020.

HEI plans to announce its third quarter 2020 consolidated financial results on Friday, November 6, 2020 and will also conduct a webcast and conference call at 11:15 a.m.Hawaii time (4:15 p.m. Eastern time) that same day to discuss its consolidated earnings, including American's earnings, and 2020 guidance.

Interested parties within the United States may listen to the conference by calling (844) 834-0652 and international parties may listen to the conference by calling (412) 317-5198 or by accessing the webcast on HEI's website at www.hei.com under the "Investor Relations" section, sub-heading "News and Events - Events and Presentations."

HEI and Hawaiian Electric Company, Inc. (Hawaiian Electric) intend to continue to use HEI's website, www.hei.com, as a means of disclosing additional information. Such disclosures will be included on HEI's website in the Investor Relations section. Accordingly, investors should routinely monitor the Investor Relations section of HEI's website at www.hei.com in addition to following HEI's, Hawaiian Electric's and American's press releases, HEI's and Hawaiian Electric's Securities and Exchange Commission (SEC) filings and HEI's public conference calls and webcasts. The information on HEI's website is not incorporated by reference in this document or in HEI's and Hawaiian Electric's SEC filings unless, and except to the extent, specifically incorporated by reference. Investors may also wish to refer to the Public Utilities Commission of the State of Hawaii (PUC) website at dms.puc.hawaii.gov/dms in order to review documents filed with and issued by the PUC. No information on the PUC website is incorporated by reference in this document or in HEI's and Hawaiian Electric's SEC filings.

An on-line replay of the November 6, 2020 webcast will be available on HEI's website beginning about two hours after the event. Audio replays of the conference call will also be available approximately two hours after the event through November 20, 2020 by dialing (877) 344-7529 or (412) 317-0088 and entering passcode 10148946.

HEI supplies power to approximately 95% of Hawaii's population through its electric utility, Hawaiian Electric; provides a wide array of banking and other financial services to consumers and businesses through American, one of Hawaii's largest financial institutions; and helps advance Hawaii's clean energy and sustainability goals through investments by its non-regulated subsidiary, Pacific Current, LLC.

FORWARD-LOOKING STATEMENTS

This release may contain "forward-looking statements," which include statements that are predictive in nature, depend upon or refer to future events or conditions, and usually include words such as "will," "expects," "anticipates," "intends," "plans," "believes," "predicts," "estimates" or similar expressions. In addition, any statements concerning future financial performance, ongoing business strategies or prospects or possible future actions are also forward-looking statements. Forward-looking statements are based on current expectations and projections about future events and are subject to risks, uncertainties and the accuracy of assumptions concerning HEI and its subsidiaries, the performance of the industries in which they do business and economic, political and market factors, among other things. These forward-looking statements are not guarantees of future performance.

Forward-looking statements in this release should be read in conjunction with the "Cautionary Note Regarding Forward-Looking Statements" and "Risk Factors" discussions (which are incorporated by reference herein) set forth in HEI's Annual Report on Form 10-K for the year ended December 31, 2019 and HEI's other periodic reports that discuss important factors that could cause HEI's results to differ materially from those anticipated in such statements. These forward-looking statements speak only as of the date of the report, presentation or filing in which they are made. Except to the extent required by the federal securities laws, HEI, Hawaiian Electric, American and their subsidiaries undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

American Savings Bank, F.S.B. STATEMENTS OF INCOME DATA (Unaudited)



Three months ended Nine months ended September 30,

(in thousands) September June 30, September 2020 2019 30, 2020 2020 30, 2019

Interest and dividend income

Interest and fees on $52,419 $53,541$59,260 $161,505 $ 175,740loans

Interest and dividends on 7,221 6,288 7,599 22,939 25,762 investment securities

Total interest and 59,640 59,829 66,859 184,444 201,502 dividend income

Interest expense

Interest on deposit 2,287 3,071 4,384 8,945 12,923 liabilities

Interest on other 61 75 422 449 1,361 borrowings

Total interest 2,348 3,146 4,806 9,394 14,284 expense

Net interest income 57,292 56,683 62,053 175,050 187,218

Provision for credit 13,970 15,133 3,315 39,504 17,873 losses

Net interest income after provision for 43,322 41,550 58,738 135,546 169,345 credit losses

Noninterest income

Fees from other 4,233 3,102 5,085 11,906 14,445 financial services

Fee income on deposit3,832 2,897 5,320 11,842 15,402 liabilities

Fee income on other 1,524 1,212 1,706 4,608 5,129 financial products

Bank-owned life 1,965 1,673 1,660 4,432 6,309 insurance

Mortgage banking 7,681 6,252 1,490 15,933 3,080 income

Gain on sale of - 9,275 653 9,275 653 securities, net

Other income, net (231) (251) 428 (69) 1,420

Total noninterest 19,004 24,160 16,342 57,927 46,438 income

Noninterest expense

Compensation and 26,431 25,079 25,364 77,287 76,626 employee benefits

Occupancy 5,693 5,442 5,694 16,402 15,843

Data processing 3,366 3,849 3,763 11,052 11,353

Services 2,624 2,474 2,829 7,907 7,861

Equipment 2,001 2,290 2,163 6,630 6,416

Office supplies, 1,187 1,049 1,297 3,577 4,320 printing and postage

Marketing 727 379 1,142 1,908 3,455

FDIC insurance 714 751 (5) 1,567 1,249

Other expense^1 4,556 7,063 3,676 15,813 12,049

Total noninterest 47,299 48,376 45,923 142,143 139,172 expense

Income before income 15,027 17,334 29,157 51,330 76,611 taxes

Income taxes 2,877 3,320 6,269 9,405 15,868

Net income $12,150 $14,014$22,888 $41,925 $ 60,743

Comprehensive income $13,543 $13,734$26,697 $62,885 $ 85,079

OTHER BANK INFORMATION (annualized %, except as of period end)

Return on average 0.61 0.72 1.29 0.73 1.14 assets

Return on average 6.75 8.00 13.75 7.95 12.44 equity

Return on average tangible common 7.62 9.07 15.68 9.00 14.23 equity

Net interest margin 3.12 3.21 3.82 3.34 3.87

Efficiency ratio 61.99 59.84 58.58 61.01 59.56

Net charge-offs to average loans 0.32 0.49 0.69 0.41 0.46 outstanding

As of period end

Nonaccrual loans to loans receivable held0.77 0.86 0.63 for investment

Allowance for credit losses to loans 1.67 1.50 1.04 outstanding

Tangible common equity to tangible 8.0 7.9 8.4 assets

Tier-1 leverage ratio8.3 8.4 8.8

Dividend paid to HEI (via ASB Hawaii, $- $- $14.0 $28.0 $ 47.0 Inc.) ($ in millions)

The three and nine-month periods ended September 30, 2020 include approximately $0.7 million and $4.5 million, respectively, of certain^ direct and incremental COVID-19 related costs. For the nine months ended1 September 30, 2020, these costs, which have been recorded in Other expense, include $2.4 million of compensation expense and $1.7 million of enhanced cleaning and sanitation costs.

This information should be read in conjunction with the consolidated financialstatements and the notes thereto in HEI filings with the SEC. Results ofoperations for interim periods are not necessarily indicative of results to beexpected for future interim periods or the full year.

American Savings Bank, F.S.B. BALANCE SHEETS DATA (Unaudited)



(in thousands) September 30, 2020 December 31, 2019

Assets

Cash and due from banks $150,087 $129,770

Interest-bearing deposits 10,918 48,628

Investment securities

Available-for-sale, at fair 1,747,658 1,232,826 value

Held-to-maturity, at amortized 133,858 139,451 cost

Stock in Federal Home Loan 10,920 8,434 Bank, at cost

Loans held for investment 5,480,902 5,121,176

Allowance for credit losses (91,459) (53,355)

Net loans 5,389,443 5,067,821

Loans held for sale, at lower 16,806 12,286 of cost or fair value

Other 533,865 511,611

Goodwill 82,190 82,190

Total assets $8,075,745 $7,233,017

Liabilities and shareholder's equity

Deposit $2,424,539 $1,909,682liabilities-noninterest-bearing

Deposit 4,613,598 4,362,220 liabilities-interest-bearing

Other borrowings 151,875 115,110

Other 165,300 146,954

Total liabilities 7,355,312 6,533,966

Common stock 1 1

Additional paid-in capital 351,322 349,453

Retained earnings 356,812 358,259

Accumulated other comprehensive income (loss), net of taxes

Net unrealized gains on $22,248 $2,481 securities

Retirement benefit plans (9,950) 12,298 (11,143)(8,662)

Total shareholder's equity 720,433 699,051

Total liabilities and $8,075,745 $7,233,017shareholder's equity

This information should be read in conjunction with the consolidated financial statements and the notes thereto in HEI filings with the SEC.

Contact:Julie R. Smolinski Telephone: (808) 543-7300

Director, Investor RelationsE-mail: ir@hei.com

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SOURCE Hawaiian Electric Industries, Inc.